Burn Rate
Monthly spending rate.
What does Burn Rate mean?
Burn rate is the speed at which a company spends its cash reserves, typically measured on a monthly basis. It is a critical metric for startups and early-stage businesses that are not yet profitable. Knowing your burn rate helps you understand how quickly you are consuming capital and how much time you have before you need additional funding or must reach profitability.
How to calculate Burn Rate
Burn rate is calculated with the formula: Burn Rate = (Starting Cash − Ending Cash) / Number of Months. For example, if you start a quarter with $500,000 and end with $200,000, your monthly burn rate is ($500,000 − $200,000) / 6 = $50,000/mo. Runway is then calculated as Ending Cash / Burn Rate — in this case $200,000 / $50,000 = 4 months of runway remaining.
FAQ
There is no universal "good" burn rate — it depends on your stage, funding, and growth strategy. A common rule of thumb is to maintain at least 12–18 months of runway. If your burn rate leaves you with less than 6 months of cash, it is generally considered risky and you should look to reduce spending or raise capital.
Gross burn rate is your total monthly spending regardless of revenue. Net burn rate subtracts any incoming revenue from your monthly expenses, giving you the actual cash decrease per month. This calculator computes net burn rate based on your starting and ending cash balances.
Common strategies include renegotiating vendor contracts, reducing headcount or delaying new hires, cutting non-essential expenses, moving to cheaper office space or going remote, and focusing marketing spend on the highest-ROI channels. The goal is to extend runway without significantly hurting growth.
Runway is the amount of time (in months) your company can continue operating at its current burn rate before running out of cash. It is calculated as your current cash balance divided by your monthly burn rate. For example, $300,000 in cash with a $50,000/mo burn rate gives you 6 months of runway.
Most startups track burn rate monthly as part of their financial review. During periods of rapid change — such as after a funding round, a major pivot, or significant hiring — it can be useful to review it weekly. Regular tracking helps you spot trends early and make proactive adjustments.
Related calculators
- Runway— Time before funds deplete.
- Break-Even— Point where revenue equals cost.
- Profit Margin— Profit as percentage of revenue.
- ROI— Return relative to investment cost.